Gold saw a minor retracement to $1927 an ounce as the Fed’s ‘hawkish pause’ on Wednesday proved more hawkish than expected.
While rates remain on hold for now, Federal Reserve Chair Powell signalled that a further rate hike might be expected later in the year and interest rates could remain elevated for longer than the market was anticipating. This ‘higher for longer’ narrative is also consistent with recent developments at other major central banks.
As a non-yielding asset, higher interest rates usually prove to be a headwind for gold prices as they increase the opportunity cost of holding the yellow metal. Higher US rates also typically lend support to the US dollar and so put pressure on the dollar’s gold price.
Nevertheless, we continue to note the remarkable resilience of gold under these market conditions.
The price retracement has been limited to just $3 per ounce and gold has traded consistently above $1900 per ounce for nearly a month. With ‘peak rates’ now likely to be seen by the end of the year, gold should have better fundamental support going into 2024.
In the meantime, gold is enjoying substantial technical support from central bank reserve managers and speculative buying as indicated by net long positions at the CFTC.
Rupert is a Market Analyst for Kinesis Money, responsible for updating the community with insights and analysis on the gold and silver markets. He brings with him a breadth of experience in writing about energy and commodities having worked as an oil markets reporter and then precious metals reporter during the seven years he worked at Bloomberg News.
As well as market analysis, Rupert writes longer-form thought leadership pieces on topics ranging from carbon markets, the growth of renewable energy and the challenges of avoiding greenwash while investing sustainably.
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